^{Source: Predictions based on consensus from Visible Alpha analysts}

Facebook Financial Results (FB): Analysis

Facebook, Inc. (FB) posted mixed results for the third quarter of fiscal 2021 on October 25. Earnings per share (EPS) exceeded consensus estimates, up 18.8% from EPS for the quarter a year earlier. Revenue missed analysts’ forecast, increasing 35.1% year over year (YOY). The platform’s Monthly Active Users (MAUs) barely match expectations. Facebook shares rose as much as 9% in after-hours trading. Over the past year, Facebook shares have provided a total return of 18.7%, lower than the 34.3% total return of the S&P 500.

Monthly active users FB

Facebook’s MAUs were up 6% from the quarter last year to just over 2.9 billion. MAUs are a key metric that Facebook uses to gauge the size of its global active user base. Facebook defines MAUs as registered and logged in users who visited Facebook through its website or mobile device, or used its Messenger app, within the 30-day measurement period.

The company derives almost all of its revenue from the sale of advertising space, largely based on the strength of MAUs, on its social media sites and apps. The larger its user base, the more attractive its platform is to advertisers. A larger user base also makes it easier to attract new users, as people want to be on Facebook because their friends are there, a classic example of the network effect.

New Facebook Reality Labs segment

Facebook has announced that it will begin publishing separate financial results for its new Facebook Reality Labs (FRL) segment starting in the fourth quarter of fiscal 2021. This segment will focus on the company’s augmented and virtual reality products and services. ‘business. The other main operating segment of Facebook will be named Family of Apps, which will include the social media platform Facebook, Instagram, Messenger, WhatsApp and other services.

Facebook is investing more and more resources in building what CEO Mark Zuckerberg calls the “metaverse,” a vast virtual world that will succeed the mobile internet and fuel a new wave of technological investment. Facebook plans to create up to 10,000 jobs in the European Union over the next five years to build the metaverse. The company would also consider a name change to accompany this refocus on the construction of the metaverse.

FB whistleblowers

Facebook’s social media platform has received a lot of negative attention lately after former Facebook employee Frances Haugen released extensive internal documentation which she says supports her claims that there are significant flaws with the giant social network. She testified before Congress earlier this month, saying the platform’s flaws are damaging to children’s safety and democracy.

Another whistleblower has since also come out and submitted an affidavit containing allegations of Facebook’s behavior, and Sophie Zhang, a former whistleblower, has again spoken out against the company. Facebook’s conference call with analysts will be the first time CEO Zuckerberg has spoken publicly since Haugen began posting documents.

FB share buybacks

Facebook announced in its fiscal year 2021 third quarter earnings report that it was increasing its share buybacks by $ 50 billion. The company repurchased $ 14.4 billion of its Class A common stock during the third quarter.

Recap of Facebook Earnings Calls

During the company’s conference call, Zuckerberg aggressively defended the company against recent criticism and leaked documents related to how its services affect users. “Good faith reviews help us improve,” Zuckerberg said. “But my take is that what we are seeing is a coordinated effort to selectively use leaked documents to paint a false image of our business.”

Zuckerberg also discussed the growing competition from Facebook for young adult users of Apple’s iMessage app and ByteDance Ltd.’s TikTok, saying that keeping and adding users in this demographic is key to the Facebook’s future success. “We are reorganizing our teams to make service to young adults their North Star, rather than optimizing for the greatest number of older people,” he said.

The company expects fiscal 2021 fourth quarter revenue to be between $ 31.5 billion and $ 34 billion, reflecting uncertainty over changes to iOS 14 d ‘Apple Inc. (AAPL) as well as macroeconomic and COVID-19 factors. Facebook’s next earnings report (for the fourth quarter of fiscal 2021) is expected to be released on January 25, 2022.